Sikorsky’s Black Hawk Platform Wins U.S. Air Force’s Combat Rescue Helicopter Contract

Sikorsky, a unit of United Technologies (NYSE:UTX), announced Thursday, June 26, that it has won a $1.3 billion contract to develop and produce the next generation combat rescue helicopters for the U.S. Air Force . ^[1] The Air Force announced in 2010 that it was looking to replace its aging HH-60G Pave Hawk combat rescue helicopters, and Sikorsky partnered with Lockheed Martin (NYSE:LMT) to bid for the contract. Sikorsky will build the helicopter and Lockheed will provide crucial subsystems for it. The contract awarded Thursday includes development of this next generation combat rescue helicopter as well as delivery of four of its units and related training systems to the Air Force. This is only the first step in a multi-year program that could see Sikorsky delivering up to 112 of these new combat rescue helicopters to the Air Force for an estimated value of about $8 billion. ^[1]

This contract comes a month after Sikorsky was awarded the contract to build the next fleet of Marine One helicopters, which flies the President of the U.S.. That contract involves production of 21 aircraft for an estimated sum of about $3 billion. ^[2] We had written in March, earlier this year, that Sikorsky stands a good chance of bagging both these contracts, as it made the current fleet of both combat rescue and Marine One helicopters. Sikorsky constitutes roughly 10% of United Technologies’s top line and is one of the leading commercial as well as military helicopter manufacturers in the world. ^[3]

See our complete analysis of United Technologies here

These Contracts Will Temper The Impact From Weak Government Military Spending

Currently, Sikorsky generates over half of its sales from the U.S. government. ^[4] With military spending from the government likely to decline through this decade due to budgetary pressures, Sikorsky will likely be impacted significantly in the coming years. In such a situation, we figure these two major contracts will help Sikorsky temper the impact from declining U.S. military spending. Both combat rescue and Marine One helicopter programs will likely run through this decade, and seeing their importance for the government, will likely also get regular appropriations from the Congress. So, right through this decade, these two contracts will ensure that Sikorsky gets a certain minimum level of sales from the government. In our opinion, this certainty eases a lot of pressure on Sikorsky.

Sikorsky’s UH-60 Black Hawk Won The Contract

Sikorsky proposed a derivative of its highly successful UH-60 Black Hawk helicopter for the combat rescue helicopter contract. This military helicopter whose production deliveries began in 2007 has sold over 700 units to the U.S. and international militaries. ^[1] We figure with another major contract in its kitty, the Black Hawk franchisee is better positioned to gain from rising international military procurement spending. According to figures cited by United Technologies, military procurement spending from Asia alone is expected to grow by 55% over the next five years. ^[5] Thus, at a time when U.S. military spending is declining, Sikorsky’s highly successful Black Hawk helicopter franchisee will in our opinion enable it to gain significant share of the growing international military helicopter market.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)
Get Trefis Technology

1. Sikorsky awarded US Air Force contract to develop new combat rescue helicopter, June 27 2014, www.utc.com [↩] [↩] [↩]
2. Sikorsky wins US Navy contract to replace Marine One fleet, May 7 2014, www.utc.com [↩]
3. UTC’s 2013 10-K, February 6 2014, www.utc.com [↩]
4. Sikorsky’s address at the annual UTC analyst meet, March 14 2014, www.utc.com [↩]
5. Sikorsky’s presentation at UTC’s annual investor summit, March 2014, www.utc.com [↩]